Kapatiran ng mga Naglilingkod sa Pamahalaan v Tan GR No 81311 June 30, 1988 

FACTS:
EO 372 was issued by the President of the Philippines which amended the Revenue Code, adopting the value-
added tax (VAT) effective January 1, 1988. Four petitions assailed the validity of the VAT Law from being
beyond the President to enact; for being oppressive, discriminatory, regressive and violative of the due process
and equal protection clauses, among others, of the Constitution. The Integrated Customs Brokers Association
particularly contend that it unduly discriminate against customs brokers (Section 103r) as the amended
provision of the Tax Code provides that “service performed in the exercise of profession or calling (except
custom brokers) subject to occupational tax under the Local Tax Code and professional services performed by
registered general professional partnerships are exempt from VAT. 

ISSUE:
Whether the E-VAT law is void for being discriminatory against customs brokers 

RULING:
No. The phrase “except custom brokers” is not meant to discriminate against custom brokers but to avert a
potential conflict between Sections 102 and 103 of the Tax Code, as amended. The distinction of the customs
brokers from the other professionals who are subject to occupation tax under the Local Tax Code is based on
material differences, in that the activities of customs partake more of a business, rather than a profession and
were thus subjected to the percentage tax under Section 174 of the Tax Code prior to its amendment by EO
273. EO 273 abolished the percentage tax and replaced it with the VAT. If the Association did not protest the
classification of customs brokers then, there is no reason why it should protest now. 

Tolentino v Secretary of Finance GR No. 115455, August 25, 1994 

FACTS:
The value-added tax (VAT) is levied on the sale, barter or exchange of goods and properties as well as on the
sale or 
exchange of services. RA 7716 seeks to widen the tax base of the existing VAT system and enhance its
administration by amending the National Internal Revenue Code (NIRC). 
Herein, various petitioners seek to declare RA 7166 as unconstitutional. One of the reasons is that it violates
Article VI, Section 28 (1) which provides that “the rule of taxation shall be uniform and equitable. The Congress
shall evolve a progressive system of taxation.” 

ISSUE:
Whether RA 7166 violates the principle of progressive system of taxation 

RULING:
No. Lacking empirical data on which to base any conclusion regarding these arguments, any discussion
whether the VAT is regressive in the sense that it will hit the poor and middle income group in society harder
than it will the rich is largely an academic exercise.

Regressivity is not a negative standard for courts to enforce. “Evolve a progressive system of taxation” is a
directive to Congress. These provisions are placed in the Constitution as moral incentives to legislation, not as
judicially enforceable rights. 

Tolentino v Secretary of Finance GR No. 115455, 249 SCRA 635 (1995) – Political Law – Origination
of Revenue Bills – EVAT – Amendment by Substitution
Arturo Tolentino et al are questioning the constitutionality of RA 7716 otherwise known as the Expanded Value
Added Tax (EVAT) Law. Tolentino averred that this revenue bill did not exclusively originate from the House of
Representatives as required by Section 24, Article 6 of the Constitution. Even though RA 7716 originated as
HB 11197 and that it passed the 3 readings in the HoR, the same did not complete the 3 readings in Senate for
after the 1st reading it was referred to the Senate Ways & Means Committee thereafter Senate passed its own
version known as Senate Bill 1630. Tolentino averred that what Senate could have done is amend HB 11197
by striking out its text and substituting it with the text of SB 1630 in that way “the bill remains a House Bill and
the Senate version just becomes the text (only the text) of the HB”. (It’s ironic however to note that  Tolentino
and co-petitioner Raul Roco even signed the said Senate Bill.)
ISSUE: Whether or not the EVAT law is procedurally infirm.
HELD: No. By a 9-6 vote, the Supreme Court rejected the challenge, holding that such consolidation was
consistent with the power of the Senate to propose or concur with amendments to the version originated in the
HoR. What the Constitution simply means, according to the 9 justices, is that the initiative must come from the
HoR. Note also that there were several instances before where Senate passed its own version rather than
having the HoR version as far as revenue and other such bills are concerned. This practice of amendment by
substitution has always been accepted. The proposition of Tolentino concerns a mere matter of form. There is
no showing that it would make a significant difference if Senate were to adopt his over what has been done.
ABAKADA v. Ermita (Delegation to the President)
469 SCRA 1: September 1, 2005

Facts: RA 9337: VAT Reform Act enacted on May 24, 2005. Sec. 4 (sales of goods and properties), Sec. 5
(importation of goods) and Sec. 6 (services and lease of property) of RA 9337, in collective, granted the
Secretary of Finance the authority to ascertain: (a) whether by 12/31/05, the VAT collection as a percentage of
the 2004 GDP exceeds 2.8% or (b)the national government deficit as a percentage of the 2004 GDP exceeds
1.5%. If either condition is met, the Sec of Finance must inform the President who, in turn, must impose the
12% VAT rate (from 10%) effective January 1, 2006.

ABAKADA maintained that Congress abandoned its exclusive authority to fix taxes and that RA 9337
contained a uniform proviso authorizing the President upon recommendation by the DOF Secretary to rasie
VAT to 12%.

Sen Pimentel maintained that RA 9337 constituted undue delegation of legislative powers and a violation of
due process since the law was ambiguous and arbitrary. Same with Rep. Escudero.

Pilipinas Shell dealers argued that the VAT reform was arbitrary, oppressive and confiscatory.

Respondents countered that the law was complete, that it left no discretion to the President, and that it merely
charged the President with carrying out the rate increase once any of the two conditions arise.

Issue: WON there was undue delegation.

Held: No delegation but mere implementation of the law. Constitution allows as under exempted delegation the
delegation of tariffs, customs duties, and other tolls, levies on goods imported and exported. VAT is tax levied
on sales of goods and services which could not fall under this exemption. Hence, its delegation if unqualified is
unconstitutional.

Legislative power is authority to make a complete law. Thus, to be valid, a law must be complete in itself,
setting forth therein the policy and it must fix a standard, limits of which are sufficiently determinate and
determinable.

No undue delegation when congress describes what job must be done who must do it and the scope of the
authority given. (Edu v Ericta)

Sec of Finance was merely tasked to ascertain the existence of facts. All else was laid out. Mainly ministerial
for the Secretary to ascertain the facts and for the president to carry out the implementation for the VAT. They
were agents of the legislative dept

CIR v. Magsaysay Lines, GR No. 146984, July 28, 2006

Facts:
Because of a government program of privatization, National Development Company(NDC) decided to sell its N
ational Marine Corporation(NMC) shares and five of its ships. In a VAT Ruling, it was held that the sale was su
bject to VAT since  NDC was a VAT-registered enterprise and the transaction is incident to its normal VAT-
registered activity of leasing out personal property.

Issue:
Whether or not the sale by NDC whose VAT-registered activity is leasing out personal property is subject to VA
T considering that such sale was made pursuant to a government program of privatization.
 
Ruling:
No, the sale of the vessels is not subject to VAT since it was not in the ordinary course of trade or business of 
NDC. “Course of business” is what is usually done in the management of trade or business. It connotes regular
ity. In the case at bar, the sale was an isolated transaction. The sale which was involuntary and made pursuant 
to the declared policy of government for privatization could no longer be repeated or carried on with regularity. 
It should be emphasized that the normal VAT
registered activity of NDC is leasing personal property. Any sale, barter, or exchange of goods or services not i
n the course of trade or business is not subject to tax.

Philippine Acetylene Co. Inc. v CIR GR No L-19707, August 17, 1967 

FACTS:
Philippine Acetylene Co. Inc. is engaged in the manufacture and sale of oxygen and acetylene gases. It sold its
products to the National Power Corporation (Napocor), an agency of the Philippine Government, and the Voice
of America (VOA), an agency of the United States Government. When the commissioner assessed deficiency
sales tax and surcharges against the company, the company denied liability for the payment of tax on the
ground that both Napocor and VOA are exempt from taxes.

ISSUE:
Is Philippine Acetylene Co. liable for tax? 

RULING:
Yes. Sales tax are paid by the manufacturer or producer who must make a true and complete return of the
amount of his, her or its gross monthly sales, receipts or earnings or gross value of output actually removed
from the factory or mill, warehouse and to pay the tax due thereon. The tax imposed by Section 186 of the Tax
Code is a tax on the manufacturer or producer and not a tax on the purchaser except probably in a very remote
and inconsequential sense. Accordingly, its levy on the sales made to tax- exempt entities like the Napocor is
permissible.

On the other hand, there is nothing in the language of the Military Bases Agreement to warrant the general
exemption granted by General Circular V-41 (1947). Thus, the expansive construction of the tax exemption is
void; and the sales to the VOA are subject to the payment of percentage taxes under Section 186 of the Tax
Code. Therefore, tax exemption is strictly construed and exemption will not be held to conferred unless the
terms under which it is granted clearly and distinctly show that such was the intention. 

CIR v American Rubber Company GR No L-19667, November 29, 1966 

FACTS:
American Rubber Company sold its rubber products locally and as prescribed by the Commissioner’s
regulation, the company declared the same for tax purposes in which the Commissioner accordingly assessed.
The company paid under protest the corresponding sales taxes thereon, claiming exemption under Section
188b of the Tax Code, and subsequently claimed refund. With the Commissioner refusing to do so, the case
was brought before the Court of Tax Appeals, which upheld the Commissioner’s stand that the company is not
entitled to recover the sales tax that had been separately billed to its customers, and paid by the latter. 

ISSUE:
Whether plaintiff is or is not entitled to recover the sales tax paid by it, but passed on to and paid by the buyers
of its products 

RULING:
Refund is proper. The sales tax is by law imposed directly, not on the thing sold, but on the act (sale) of the
manufacturer, producer or importer who is exclusively made liable for its time payment. There is no proof that
the tax paid by plaintiff is the very money paid by its customers. Where the tax money paid by the plaintiff
came from is really no concern of the Government. Anyway, once recovered, the plaintiff must hold the refund
taxes in trust for the individual purchasers who advanced payment thereof, and whose names must appear in
plaintiff’s records. 
It would need to tend to perpetuate illegal taxation; for the individual customers to whom the tax is ultimately
shifted will ordinarily not care to sue for its recovery, in view of the small amount paid by each and the high
cost of litigation for the reclaiming of an illegal tax. Insofar, therefore, as it favors the imposition, collection and
retention of illegal taxes, and encourages a multiplicity of suits, the tax court’s ruling under appeal violates
morals and public policy. 

CIR v Gotamco
GR No L-31092, February 27, 1987 

FACTS:
The World Health Organization (WHO) decided to construct a building to house its offices, as well as the other
United 
Nations Offices in Manila. Inviting bids for the construction of the building, the WHO informed the bidders of its
tax exemptions. The contract was awarded to John Gotamco and sons. The Commissioner opined that a 3%
contractor’s tax should be due from the contractor. The WHO issued a certification that Gotamco should be
exempted, but the Commissioner insisted on the tax. Raised in the Court of Tax Appeals, the Court ruled in
favor of Gotamco. 

ISSUE:
Is Gotamco liable for the tax? 

RULING:
No. Direct taxes are those that are demanded from the very person who, it is intended or desired, should pay
them; while indirect taxes are those that are demanded in the first instance from one person in the expectation
and intention that he can shift the burden to someone else. 

Herein, the contractor’s tax is payable by the contractor but it is the owner of the building that shoulders the
burden of the tax because the same is shifted by the contractor to the owner as a matter of self-preservation.
Such tax is an “indirect tax” on the organization, as the payment thereof or its inclusion in the bid price would
have meant an increase in the construction cost of the building. 

Hence, WHO’s exemption from “indirect taxes” implies that Gotamco is exempt from contractor’s tax. 

G.R. No. 172378 January 17, 2011

SILICON PHILIPPINES, INC. (formerly INTEL PHILIPPINES MANUFACTURING, INC.) vs. COMMISSIONER OF INTERNAL REVENUE
Facts: Petitioner Silicon Philippines, Inc., a Philippine corporation engaged in the business of designing, developing, manufacturing and
exporting advance and large-scale integrated circuit components or "IC’s.", is registered with the Bureau of Internal Revenue (BIR) as a
Value Added Tax (VAT) taxpayer. Petitioner filed with the respondent Commissioner of Internal Revenue (CIR) an application for
credit/refund of unutilized input VAT for 1998 in the amount of P31,902,507.50. The CIR denied this application. On appeal to the Court
of Tax Appeals (CTA) Division, petitioner’s claim for refund of unutilized input VAT on capital goods was granted. However, the CTA
Division reduced the amount which petitioner claimed from P15,170,082.00 to P9,898,867.00 .With regard to petitioner’s claim for
credit/refund of input VAT attributable to its zero-rated export sales, the CTA Division denied the same. Upon denial of its motion for
reconsideration, petitioner elevated the case to the CTA En Banc. The CTA En Banc denied petitioner’s claim for credit/ refund of input
VAT attributable to its zero-rated sales due to its failure to show that it secured an Authorization-to-Print (ATP) invoices from the BIR and
to indicate the same in its export sales invoices; and failure to print the word "zero-rated" in its export sales invoices. It also ruled that
the items being claimed as capital goods (training materials, office supplies, posters, banners, t-shirts, books and the like) purchased by
petitioner were not duly proven to have been used, directly or indirectly in the production or sale of taxable goods or services. As such,
they cannot be considered as capital goods, and so the reduction decided by the CTA Division was upheld.

Issues:
1. Whether or not petitioner can claim credit/refund of input VAT attributable to its zero-rated sales.
2. Whether or not the petitioner can claim input VAT paid on capital goods.

Ruling:

1. No.

In a claim for credit/refund of input VAT attributable to zero-rated sales, Section 112 (A) of the NIRC lays down four requisites: (1) the
taxpayer must be VAT-registered; (2) the taxpayer must be engaged in sales which are zero-rated or effectively zero-rated; (3) the claim
must be filed within two years after the close of the taxable quarter when such sales were made; and (4) the creditable input tax due or
paid must be attributable to such sales, except the transitional input tax, to the extent that such input tax has not been applied against
the output tax.

Under Section 112(A) of the NIRC, a claimant must be engaged in sales which are zero-rated or effectively zero-rated. To prove this, duly
registered invoices or receipts evidencing zero-rated sales must be presented. However, since the ATP is not indicated in the invoices or
receipts, the only way to verify whether the invoices or receipts are duly registered is by requiring the claimant to present its ATP from
the BIR. Without this proof, the invoices or receipts would have no probative value for the purpose of refund. In the case of Intel, we
emphasized that “It is not specifically required that the BIR authority to print be reflected or indicated therein. Indeed, what is important
with respect to the BIR authority to print is that it has been secured or obtained by the taxpayer, and that invoices or receipts are duly
registered.”

The non-presentation of the ATP and the failure to indicate the word "zero-rated" in the invoices or receipts are fatal to a claim for
credit/refund of input VAT on zero-rated sales. The failure to indicate the ATP in the sales invoices or receipts, on the other hand, is not.
In this case, petitioner failed to present its ATP and to print the word "zero-rated" on its export sales invoices. Thus, the CTA ruled
correctly.

2. No.

To claim a refund of input VAT on capital goods, Section 112 (B) of the NIRC requires that: (1) The claimant must be a VAT registered
person; (2) The input taxes claimed must have been paid on capital goods; (3) The input taxes must not have been applied against any
output tax liability; and (4) The administrative claim for refund must have been filed within two years after the close of the taxable
quarter when the importation or purchase was made. Section 4.106-1(b) of RR No. 7-95 defines capital goods as “goods or properties
with estimated useful life greater that one year and which are treated as depreciable assets under Section 29 (f), used directly or
indirectly in the production or sale of taxable goods or services.” Based on this definition, the Supreme Court affirmed the findings of the
CTA that training materials, office supplies, posters, banners, T-shirts, books, and the other similar items reflected in petitioner’s
Summary of Importation of Goods are not capital goods. The reduction in the refundable input VAT on capital goods from
P15,170,082.00 to P9,898,867.00 is proper.

National Internal Revenue Code; value-added tax; claim for credit or refund of input value-added tax; requirements. In its
section 112 (A), the National Internal Revenue Code sets down the following requirements in a claim for credit or refund of input value-
added tax (VAT): (1) the taxpayer must be VAT registered, (2) the taxpayer must be engaged in sales which are zero-rated or effectively
zero-rated, (3) the claim must be filed within two years after the close of the taxable quarter when such sales were made, and (4) the
creditable input VAT due or paid must be attributable to such sales, except the transitional input VAT, to the extent that such input VAT
has not been applied against the output VAT.  Silicon Philippines, Inc. (formerly Intel Philippines Manufacturing, Inc.) vs Commissioner
of Internal Revenue, G.R. No. 172378, January 17, 2011.

National Internal Revenue Code; value-added tax; claim for credit or refund of input value-added tax; authority to print. The
authority to print (ATP) need not be reflected or indicated in the invoices or receipts because there is no law or regulation requiring it. In
the absence of such law or regulation, failure to print the ATP on the invoices or receipts should not result in the outright denial of a
claim or the invalidation of the invoices or receipts for purposes of claiming a refund. However, section 238 of the National Internal
Revenue Code (Tax Code) expressly requires persons engaged in business to secure an ATP from the Bureau of Internal Revenue prior
to printing invoices or receipts. Under section 112 (A) of the Tax Code, a claimant must be engaged in sales which are zero-rated or
effectively zero-rated. To prove this, duly registered invoices or receipts evidencing zero-rated sales must be presented. However, since
the ATP is not indicated in the invoices or receipts, the only way to verify whether the invoices or receipts are duly registered is by
requiring the claimant to present its ATP from the BIR. Without this proof, the invoices or receipts would have no probative value for the
purpose of refund.  Silicon Philippines, Inc. (formerly Intel Philippines Manufacturing, Inc.) vs Commissioner of Internal Revenue, G.R.
No. 172378, January 17, 2011.

G.R. No. 180173 April 6, 2011

MICROSOFT PHILIPPINES, INC. vs. COMMISSIONER OF INTERNAL REVENUE
Facts: Petitioner Microsoft Philippines, Inc., a VAT-registered taxpayer, renders marketing services to Microsoft Operations Pte. Ltd.
(MOP) and Microsoft Licensing, Inc. (MLI), both affiliated non-resident foreign corporations. The services are paid for in acceptable
foreign currency and qualify as zero-rated sales for VAT purposes.
Petitioner filed an administrative claim for tax credit of VAT input taxes in the amount of P11,449,814.99 attributable to its zero-rated
sales. Due to the Bureau of Internal Revenue’s (BIR) inaction, petitioner filed a petition for review before the Court of Tax Appeals (CTA),
which denied the claim for tax credit of VAT input taxes. The CTA explained that petitioner failed to comply with the invoicing
requirements of Sections 113 and 237 of the National Internal Revenue Code (NIRC) as well as Section 4.108-1 of Revenue Regulations
No. 7-95 (RR 7-95). The CTA stated that petitioner’s official receipts do not bear the imprinted word "zero-rated" on its face, thus, the
official receipts cannot be considered as valid evidence to prove zero-rated sales for VAT purposes.

Issue: Whether or not the petitioner is entitled to a refund of VAT input taxes.

Ruling: No.

The invoicing requirements for a VAT-registered taxpayer as provided in the NIRC and revenue regulations are clear. A VAT-registered
taxpayer is required to comply with all the VAT invoicing requirements to be able to file a claim for input taxes on domestic purchases
for goods or services attributable to zero-rated sales. A "VAT invoice" is an invoice that meets the requirements of Section 4.108-1 of RR
7-95. Contrary to petitioner's claim, RR 7-95 expressly states that "All purchases covered by invoices other than a VAT invoice shall not
give rise to any input tax." Petitioner's invoice, which lacks the word "zero-rated," is not a "VAT invoice," and thus cannot give rise to any
input tax.

It was ruled in several cases that the printing of the word "zero-rated" is required to be placed on VAT invoices or receipts covering zero-
rated sales in order to be entitled to claim for tax credit or refund. In Panasonic v. Commissioner of Internal Revenue, it was held that
the appearance of the word "zero-rated" on the face of invoices covering zero-rated sales prevents buyers from falsely claiming input
VAT from their purchases when no VAT is actually paid. Absent such word, the government may be refunding taxes it did not collect. In
the case at bar, both the CTA Second Division and CTA En Banc found that Microsoft's receipts did not indicate the word "zero-rated" on
its official receipts.

COMMISSIONER OF INTERNAL REVENUE, petitioner vs. SEKISUI JUSHI PHILIPPINES, INC., respondent. G.R. No. 149671, July 21, 2006;
Panganiban, J.

Respondent is a PEZA registered enterprise availing of the incentive under EO No. 226 thus entitled to an income tax holiday. It
registered with the BIR as a VAT taxpayer and exported all of its products. Since it has unutilized input taxes, it claimed for a VAT refund.

Issue: Can a PEZA-registered enterprise be covered by the VAT system?

Business enterprise registered with the PEZA may choose between two fiscal incentive schemes: (1) t pay a five percent
preferential tax rate on its gross income and thus be exempt from all other taxes; or (2) to enjoy an income tax holiday (ITH), in which
case it is not exempt from other national revenue taxes including the VAT. Having availed of the second incentive scheme, respondent is
covered by the VAT system. Since respondent was able to prove that all its manufactures products are in fact exported, all of its sales are
zero-rated. Accordingly, it is entitled to claim as refund all unutilized input taxes.

Western Mindanao Power Corp vs CIR GR 181136 June 13 2012

Facts: WMPC, engaged in the production and sale of electricity, is registered as a VAT taxpayer. It sells electricity solely to the National
Power Corporation (NPC), which is in turn exempt from the payment of all forms of taxes, duties, fees and imposts, pursuant to its
charter. Also, pursuant to Section 108(B) (3) of the NIRC, WMPC’s power generation services to NPC is zero-rated. Thus, WMPC tried to
file an application for tax credit certificates on input VAT paid to its zero-rated sales. However, its application was denied because of
WMPC’s failure to comply with the invoicing requirements under Section 113 of the NIRC in relation to Sec 4.108-1 of RR 7-95.
Issue: W/N denial of application for tax refund or tax credit on the ground that the taxpayer’s Official Receipts do not contain the phrase
“zero-rated” is proper
Ruling::Yes. Failure to indicate the term zero-rated in the invoice or receipt for zero-rated transactions is fatal.
In a claim for tax refund or tax credit, the taxpayer must prove not only entitled to the grant of claim under substantive law, but must
also show satisfaction of all the documentary and evidentiary requirements for an administrative claim of a refund or tax credit. Hence,
the mere fact that the applicant’s zero-rating has been approved by the CIR does not, by itself, justify the grant of a refund or tax credit.
The taxpayer must further comply with the invoicing and accounting requirements mandated by the NIRC, as well as the revenue
regulations implementing them.
Under the NIRC, a creditable input tax should be evidenced by a VAT receipt or Official Receipt, which may only be considered as such
when it complies with the requirements of RR 7-95 particulary Section 4.108-1 thereof. This section requires, among others, that if the
sale is subject to zero-percent VAT, the term zero-rated sale shall be written or printed prominently on the invoice or receipt. ##
Relevant Provisions; Section 112. Refunds or Tax Credits of Input Tax; SECTION 4.108-1. Invoicing Requirements

G.R. No. 178090 February 8, 2010

PANASONIC COMMUNICATIONS IMAGING CORPORATION OF THE PHILIPPINES (formerly MATSUSHITA BUSINESS MACHINE
CORPORATION OF THE PHILIPPINES) vs. COMMISSIONER OF INTERNAL REVENUE

Facts: Petitioner Panasonic Communications Imaging Corporation of the Philippines produces and exports plain paper copiers and their
sub-assemblies, parts, and components. It is a registered value-added tax (VAT) enterprise. From 1998 to 1999, petitioner generated
export sales where it paid input VAT of P9,368,482.40 believing that its sales are zero-rated sales. Claiming that the input VAT it paid
remained unutilized. Panasonic filed with the Bureau of Internal Revenue (BIR) two separate applications for refund or tax credit of what
it paid. When the BIR did not act on the same, Panasonic filed a petition for review with the Court of Tax Appeals (CTA). The CTA First
Division denied the petition stating that while petitioner’s export sales were subject to 0% VAT under the NIRC, the same did not qualify
for zero-rating because the word "zero-rated" was not printed on its export invoices. This omission violates the invoicing requirements
of Section 4.108-1 of Revenue Regulations (RR) 7-95. The motion for reconsideration was denied. On appeal, the CTA en banc upheld the
First Division’s decision.
Issue: Whether or not the words "zero-rated" must appear in the sales invoice so that a claim for refund of unutilized input VAT on zero-
rated sales will be proper.
Ruling: Yes.
Zero-rated transactions generally refer to the export sale of goods and services. When applied to the tax base or the selling price of the
goods or services sold, such zero rate results in no tax chargeable against the foreign buyer or customer. But, although the seller in such
transactions charges no output tax, he can claim a refund of the VAT that his suppliers charged him. The seller thus enjoys automatic
zero rating, which allows him to recover the input taxes he paid relating to the export sales, making him internationally competitive. For
the effective zero rating of such transactions, however, the taxpayer has to be VAT-registered and must comply with invoicing
requirements. Interpreting these requirements, respondent CIR ruled that under Revenue Memorandum Circular (RMC) 42-2003, the
taxpayer’s failure to comply with invoicing requirements will result in the disallowance of his claim for refund.
If the claim for refund is based on the existence of zero-rated sales by the taxpayer but it fails to comply with the invoicing requirements
in the issuance of sales invoices, its claim for tax credit/refund of VAT on its purchases shall be denied considering that the invoice it is
issuing to its customers does not depict its being a VAT-registered taxpayer whose sales are classified as zero-rated sales. Nonetheless,
this treatment is without prejudice to the right of the taxpayer to charge the input taxes to the appropriate expense account or asset
account subject to depreciation, whichever is applicable. Moreover, the case shall be referred by the processing office to the concerned
BIR office for verification of other tax liabilities of the taxpayer.

In
.
Digest tis case HITACHI GLOBAL STORAGE TECHNOLOGIES PHILIPPINES v CIR

HITACHI GLOBAL STORAGE TECHNOLOGIES PHILIPPINES CORP. (formerly HITACHI COMPUTER

PRODUCTS (ASIA) CORPORATION),
Petitioner,

- versus -

COMMISSIONER OF INTERNAL REVENUE,

Respondent.
G.R. No. 174212

Promulgated:

October 20, 2010

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

The Case

This is a petition for review[1] of the 22 March 2006 Decision[2] and 14 August 2006 Resolution[3] of the Court
of Tax Appeals (CTA) En Banc in CTA EB No. 54. The 22 March 2006 Decision affirmed the 9 March 2004
Decision[4] and 9 December 2004 Resolution[5] of the CTA First Division which denied petitioner Hitachi
Global Storage Technologies Philippines Corp.s (Hitachi) claim for refund or tax credit in the amount of
P25,023,471.84. The 14 August 2006 Resolution denied Hitachis motion for reconsideration.

The Facts

Hitachi is a domestic corporation engaged in the business of manufacturing and exporting computer products.
Hitachi is registered with the Bureau of Internal Revenue (BIR) as a Value-added Tax (VAT) taxpayer,
evidenced by Certificate of Registration No. 94-570-000298 and Taxpayer Identification No. 003-877-830
(VAT) issued on 28 June 1994. Hitachi is also registered with the Export Processing Zone Authority as an
Ecozone Export Enterprise.

On 4 August 2000, Hitachi filed an administrative claim for refund or issuance of a tax credit certificate before
the BIR.[6] The claim involved P25,023,471.84 representing excess input VAT attributable to Hitachis zero-
rated export sales for the four taxable quarters of 1999.

On 2 July 2001, due to the BIRs inaction, Hitachi filed a petition for review with the CTA.[7] On 9 March 2004,
the CTA First Division rendered a decision, the dispositive portion of which reads:

IN VIEW OF THE FOREGOING, petitioners claim for refund or issuance of a tax credit certificate in the amount
of P25,023,471.84 representing excess input value-added tax (VAT) payments that are attributable to zero-
rated export sales for the four taxable quarters of 1999 is hereby DENIED.
SO ORDERED.[8]
Hitachi filed a motion for reconsideration. In its 9 December 2004 Resolution, the CTA First Division denied
Hitachis motion.

On 26 January 2005, Hitachi filed a petition for review with the CTA En Banc. In its 22 March 2006 Decision,
the CTA En Banc affirmed the 9 March 2004 Decision and 9 December 2004 Resolution of the CTA First
Division.

Hitachi filed a motion for reconsideration. In its 14 August 2006 Resolution, the CTA En Banc denied Hitachis
motion.

Hence, this petition.

The Ruling of the CTA First Division

In its 9 March 2004, the CTA First Division denied Hitachis claim for refund or tax credit because of Hitachis
failure to comply with the mandatory invoicing requirements. According to the CTA First Division, Hitachis
export sales invoices did not have pre-printed taxpayers identification number (TIN) followed by the word VAT
nor did the invoices bear the imprinted word zero-rated as required in Section 113(A)[9] of the National Internal
Revenue Code (NIRC) and Section 4.108-1 of Revenue Regulation No. 7-95[10] (RR 7-95). The CTA First
Division also found that Hitachis export sales invoices were not duly registered with the BIR as required under
Section 237[11] of the NIRC and there was no BIR authority to print the invoices or BIR permit number
indicated in the invoices. Therefore, the CTA First Division did not consider Hitachis export sales invoices as
valid evidence of zero-rated sales of goods for VAT purposes and, consequently, denied Hitachis claim for a
refund or tax credit.

The Ruling of the CTA En Banc

The CTA En Banc affirmed the findings of the CTA First Division that Hitachi failed to comply with the
mandatory invoicing requirements under the NIRC and RR 7-95. The CTA En Banc agreed with the CTA First
Division that Hitachi failed to substantiate its alleged zero-rated sales because its export sales invoices were
not duly registered with the BIR. Neither did the export sales invoices indicate Hitachis TIN nor did they state
that Hitachi was a VAT registered person. Likewise, the word zero-rated was not imprinted on Hitachis export
sales invoices. According to the CTA En Banc, the VAT law is clear that only transactions evidenced by VAT
official receipts or sales invoices will be considered as VAT transactions for purposes of the input and output
tax.

The Issues

Hitachi raises the following issues:

I. Whether Hitachis failure to comply with the requirements prescribed under Section 4.108-1 of RR 7-
95 is sufficient to invalidate Hitachis claim for VAT refund for taxable year 1999;

II. Whether Hitachi has sufficiently complied with the requirements for its claim for VAT refund for
taxable year 1999; and

III. Whether the CTA En Banc erred when it denied Hitachis claim for VAT refund for taxable year 1999.

The Ruling of the Court

The petition has no merit.

Hitachi argues that Section 4.108-1 of RR 7-95 cannot expand the invoicing requirements prescribed by
Section 113(A) of the NIRC, in relation to Sections 237 and 106(A)(2)(a)(1),[12] by imposing the additional
requirement of printing the word zero-rated on the invoices of a VAT registered taxpayer. Hitachi also submits
that the non-observance of the requirements of (1) printing zero-rated; (2) BIR authority to print; (3) BIR permit
number; and (4) registration of such receipts with the BIR cannot result in the outright invalidation of its claim
for refund.

We already settled the issue of printing the word zero-rated on the sales invoices in Panasonic v.
Commissioner of Internal Revenue.[13] In that case, we denied Panasonics claim for refund of the VAT it paid
as a zero-rated taxpayer on the ground that its sales invoices did not state on their face that its sales were
zero-rated. We said:

But when petitioner Panasonic made the export sales subject of this case, i.e., from April 1998 to March 1999,
the rule that applied was Section 4.108-1 of RR 7-95, otherwise known as the Consolidated Value-Added Tax
Regulations, which the Secretary of Finance issued on December 9, 1995 and took effect on January 1, 1996.
It already required the printing of the word zero-rated on invoices covering zero-rated sales. When R.A. 9337
amended the 1997 NIRC on November 1, 2005, it made this particular revenue regulation a part of the tax
code. This conversion from regulation to law did not diminish the binding force of such regulation with respect
to acts committed prior to the enactment of that law.
Section 4.108-1 of RR 7-95 proceeds from the rule-making authority granted to the Secretary of Finance under
Section 245 of the 1997 NIRC (Presidential Decree 1158) for the efficient enforcement of the tax code and of
course its amendments. The requirement is reasonable and is in accord with the efficient collection of VAT
from the covered sales of goods and services. As aptly explained by the CTAs First Division, the appearance
of the word zero-rated on the face of the invoices covering zero-rated sales prevents buyers from falsely
claiming input VAT from their purchases when no VAT was actually paid. If absent such word, a successful
claim for input VAT is made, the government would be refunding money it did not collect. (Emphasis supplied)
Likewise, in this case, when Hitachi filed its claim for refund or tax credit, RR 7-95 was already in force. Section
4.108-1 of RR 7-95 specifically required the following to be reflected in the invoice:

Sec.4.108-1. Invoicing Requirements. - All VAT-registered persons shall, for every sale or lease of goods or
properties or services, issue duly registered receipts or sales or commercial invoices which must show:

1. the name, TIN and address of seller;

2. date of transaction;
3. quantity, unit cost and description of merchandise or nature of service;
4. the name, TIN, business style, if any, and address of the VAT-registered purchaser, customer or client;
5. the word zero-rated imprinted on the invoice covering zero-rated sales; and
6. the invoice value or consideration.
xxxx

Only VAT-registered persons are required to print their TIN followed by the word VAT in their invoices or
receipts and this shall be considered as a VAT invoice. All purchases covered by invoices other than a VAT
invoice shall not give rise to any input tax. (Emphasis supplied)

Both the CTA First Division and the CTA En Banc found that Hitachis export sales invoices did not indicate
Hitachis Tax Identification Number (TIN) followed by the word VAT. The word zero-rated was also not
imprinted on the invoices. Moreover, both the CTA First Division and the CTA En Banc found that the invoices
were not duly registered with the BIR.

Being a specialized court, the CTA has necessarily developed an expertise in the subject of taxation that this
Court has recognized time and again.[14] For this reason, the findings of fact of the CTA are generally
conclusive on this Court absent grave abuse of discretion or palpable error, which are not present in this case.
[15]

Besides, tax refunds, like tax exemptions, are construed strictly against the taxpayer.[16] The claimants have
the burden of proof to establish the factual basis of their claim for refund or tax credit.[17] In this case, Hitachi
failed to establish the factual basis of its claim for refund or tax credit.

WHEREFORE, we DENY the petition. We AFFIRM the 22 March 2006 Decision and the 14 August 2006
Resolution of the Court of Tax Appeals En Banc in CTA EB No. 54.

CIR v Manila Mining Corporation G.R No. 153204 August 31, 2005

Facts:

The respondent is a VAT- registered corporation that engaged in the sale of gold to the Central Bank
amounting to P200,832. Seeking for tax refund/credit of the input VAT it paid pursuant to Sec. 2 of E.O 581,
the respondent file an application for tax refund.

As CIR failed to act upon respondent’s application within sixty (60) days from the dates of filing, the respondent
filed a petition for review with the CTA, seeking the issuance of tax credit certificates.

Nonetheless, the CTA denied the respondent’s claim for refund of input VAT for failure to prove that it paid the
amounts claimed as such for the year 1991, no sales invoices, receipts or other documents as required. The
respondent appealed to the CA contending the CTA erred in denying the refund for insufficiency of evidence.
The CA reversed the decision of the CTA and granted the respondent’s claim for refund or issuance of tax
credit certificates. In granting the refund, the appellate court held that there was no need for respondent to
present the photocopies of the purchase invoices or receipts evidencing the VAT paid in view of Rule 26, Sec.
2 of the Revised Rules of Court.

Issue:

Whether or not respondent is entitled to a refund/credit despite the lack of photocopies of the purchase
invoices or receipts?

Held:
 No, the court held that the respondent is not entitled to the refund or credit for failure to provide the required
purchase receipts and invoices. As export sales, the sale of gold to the Central Bank is zero-rated, hence, no
tax is chargeable to it as purchaser. Zero rating is primarily intended to be enjoyed by the seller-respondent,
herein, which charges no output VAT but can claim a refund of or a tax credit certificate for the input VAT
previously charged to it by suppliers. For a judicial claim for refund to prosper, however, respondent must not
only prove that it is a VAT registered entity and that it filed its claims within the prescriptive period. It must
substantiate the input VAT paid by purchase invoices or official receipts. The respondent failed to do so. Its
contention that the certification of the independent CPA should be sufficient to establish the purchase invoices
cannot be given merit.

Under R.A 1125, the CTA is described as a court of record. As cases filed before it are litigated de novo, party
litigants should prove every minute aspect of their cases. No evidentiary value can be given the purchase
invoices or receipts submitted to the BIR as the rules on documentary evidence require that these documents
must be formally offered before the CTA.

PAGCOR v. BIR, GR No. 172087, March 15, 2011

645 SCRA 338 – Taxation Law – Income Taxation – Corporate Taxpayers – PAGCOR is not exempt from
income taxation

Political Law – Equal Protection Clause

The Philippine Amusement and Gaming Corporation (PAGCOR) was created by P.D. No. 1067-A in 1977.
Obviously, it is a government owned and controlled corporation (GOCC).

In 1998, R.A. 8424 or the National Internal Revenue Code of 1997 (NIRC) became effective. Section 27
thereof provides that GOCC’s are NOT EXEMPT from paying income taxation but it exempted the following
GOCCs:

1. GSIS
2. SSS
3. PHILHEALTH
4. PCSO
5. PAGCOR

But in May 2005, R.A. 9337, a law amending certain provisions of R.A. 8424, was passed. Section 1 thereof
excluded PAGCOR from the exempt GOCCs hence PAGCOR was subjected to pay income taxation. In
September 2005, the Bureau of Internal Revenue issued the implementing rules and regulations (IRR) for R.A.
9337. In the said IRR, it identified PAGCOR as subject to a 10% value added tax (VAT) upon items covered by
Section 108 of the NIRC (Sale of Services and Use or Lease of Properties).

PAGCOR questions the constitutionality of Section 1 of R.A. 9337 as well as the IRR. PAGCOR avers that the
said provision violates the equal protection clause. PAGCOR argues that it is similarly situated with SSS,
GSIS, PCSO, and PHILHEALTH, hence it should not be excluded from the exemption.

ISSUE: Whether or not PAGCOR should be subjected to income taxation.

HELD: Yes. Section 1 of R.A. 9337 is constitutional. It was the express intent of Congress to exclude PAGCOR
from the exempt GOCCs hence PAGCOR is now subject to income taxation.

PAGCOR’s contention that the law violated the constitution is not tenable. The equal protection clause
provides that all persons or things similarly situated should be treated alike, both as to rights conferred and
responsibilities imposed.

The general rule is, ALL GOCC’s are subject to income taxation. However, certain classes of GOCC’s may be
exempt from income taxation based on the following requisites for a valid classification under the principle of
equal protection:

1) It must be based on substantial distinctions.

2) It must be germane to the purposes of the law.

3) It must not be limited to existing conditions only.

4) It must apply equally to all members of the class.

When the Supreme Court looked into the records of the deliberations of the lawmakers when R.A. 8424 was
being drafted, the SC found out that PAGCOR’s exemption was not really based on substantial distinctions. In
fact, the lawmakers merely exempted PAGCOR from income taxation upon the request of PAGCOR itself. This
was changed however when R.A. 9337 was passed and now PAGCOR is already subject to income taxation.
Anent the issue of the imposition of the 10% VAT against PAGCOR, the BIR had overstepped its authority.
Nowhere in R.A. 9337 does it state that PAGCOR is subject to VAT. Therefore, that portion of the IRR issued
by the BIR is void. In fact, Section 109 of R.A. 9337 expressly exempts PAGCOR from VAT. Further,
PAGCOR’s charter exempts it from VAT.

To recapitulate, PAGCOR is subject to income taxation but not to VAT.